The Department of Health and Human Services is proposing a rule that would, if implemented, guarantee that even more Americans who like their health insurance plans cannot keep them.
Fixed indemnity plans, which pay insured customers a set amount towards medical expenses and are often cost-effective relative to more comprehensive health insurance, are popular forms of coverage, and potentially becoming more popular in the wake of Obamacare.
Health insurance industry representatives say that fixed indemnity plans have been attracting more interest as many Americans look for a way to mitigate against the high deductibles applicable to many insurance policies available on the Obamacare exchanges (fixed indemnity plans are not Obamacare-compliant, but they are seen by some consumers as pairing nicely with Obamacare-compliant insurance).
But the HHS rule would effectively ban them, overriding regulation that has up until now been the preserve of state governments. The rule would state that these plans can only be sold to consumers where that consumer also purchases Obamacare-compliant insurance.
It is difficult for fixed indemnity providers to determine definitively whether a given customer carries Obamacare-compliant insurance. The proposed regulation may also conflict with state laws pertaining to fixed indemnity. This uncertainty creates a regulatory nightmare for insurers, threatening to cause insurers to stop offering fixed indemnity coverage altogether, whether consumers like it or not.
“This latest proposed Obamacare regulation, like many before it, isn’t even a remotely plausible interpretation of the statutes that Congress actually passed”, wrote Ed Haislmaier, a senior fellow at Heritage Foundation. “This latest “fix” is worth fighting — both to keep the lifeboats intact during this dangerous voyage and to keep a sound insurance option in place for the long haul.”
Under the proposal, consumers who can afford only fixed indemnity insurance may wind up carrying no insurance at all and simply paying the Obamacare penalty. Consumers could face higher risks of medical cost-related bankruptcy, while a lower number of consumers- especially younger consumers, who may be able to afford fixed indemnity but not an Obamacare-compliant policy- reject entering the insurance marketplace full stop, thus risking driving up insurance costs for existing insured consumers.
It could also mean that hospitals and other health care providers have a harder time recouping costs for treatment, as more patients go “naked,” lacking even the basic coverage that fixed indemnity plans offer, and cause further inflation in health care costs as providers seek to recoup losses from those who can and will pay.